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ASIFMA Asia Regulatory Review

27 OCTOBER - 3 November 2015 | Issue 275


ASIFMA Annual Conference 2015 to be held on 2-3 December 2015 in Hong Kong
As an industry-wide event, ASIFMA's flagship Annul Conference provides a unique opportunity for global and regional policy makers, high-level regulators and industry representatives from both sell-side and buy-side firms to meet and discuss important issues affecting the development of Asia's capital markets. Register now given seats are limited!



China unveils proposals for formulating nation's five-year plan
Chinese President Xi Jinping said Tuesday that the country's annual growth rate should be no less than 6.5 percent in the next five years to realize the goal to double 2010 GDP and per capita income by 2020. Under financial reform, China will continue to support RMB's bid for inclusion in the IMF Special Drawing Right(SDR) basket and push ahead with capital account liberalization and the internationalization of RMB, according to the document. China will accelerate reforms in its financial system to establish a transparent and healthy capital market. (China Daily)

China targets transparency to woo foreign investors
China will attract more foreign investors by being clearer on the rules that apply to them, according to a communique released on Thursday following the Fifth Plenary Session of the 18th Communist Party of China (CPC) Central Committee. At this key four-day meeting, leaders decided on nationwide adoption of the "negative list" model that clearly states sectors and businesses that are off limits to foreign investment. This will help ensure protection of foreign investors' rights and better allocate their funding. The communique suggested the service sector in particular should be further opened to foreign investment. (Xinhua)


FSDC - Strengthening Hong Kong as a Capital Formation Centre for Exchange Traded Funds
The Financial Services Development Council (FSDC) released a report entitled Strengthening Hong Kong as a Capital Formation Centre for Exchange Traded Funds (ETF), with a view to bolstering growth in Hong Kong's ETF market. The report notes that Hong Kong's ETF market has developed successfully over the past 15 years. There are currently over 100 ETFs listed in Hong Kong with a broad range of local and overseas underlying assets in various classes.

SFC - Process Review Panel Report 2014-2015
The Securities and Futures Commission (SFC) is pleased to note the publication of the annual report by the Process Review Panel (PRP) for the SFC. The PRP, which published its report today, conducted a comprehensive review of 58 cases in 2014-2015 covering various areas of the SFC's work.

HKEx - Investor Relations Symposium Latest Initiative Under HKEx's Stock Connect Education Programme
While Shanghai-Hong Kong Stock Connect has opened up a new pool of investors for Hong Kong-listed companies, the knowledge of HKEx's securities market varies. The results of a survey jointly conducted by HKEx and the Shanghai Stock Exchange suggest that Mainland investors would like to know more about issues like corporate actions in Hong Kong. The survey also found they are interested in the background and latest updates of Hong Kong-listed companies.


MAS - Ms Jacqueline Loh Keynote Address
The speech shares a few observations on how the Singapore insurance industry can capitalise on the opportunities created by new risks, new client segments, and new markets in Asia.

SGX to extend privy list requirement to all material transactions
Following public consultation, Singapore Exchange (SGX) has decided to widen the practice of listed companies maintaining a privy list to all material transactions, from only certain significant transactions currently. Respondents to the consultation were generally supportive of the practice of keeping the list which contains details of parties privy to the transaction. They recognised the privy list as a useful regulatory tool when SGX conducts an investigation into, for instance, insider trading. Currently, SGX requires the privy list to be maintained only for certain significant transactions i.e. takeovers, reverse takeovers or very substantial acquisitions.


Bank of Japan - Outlook for Economic Activity and Prices October 2015
The report highlights Japan's economy is likely to continue growing at a pace above its potential from fiscal 2015 through fiscal 2016. Thereafter, through fiscal 2017, the economy is projected to maintain its positive growth, although with a slowing in its pace to around a level somewhat below the potential growth rate.


RBI - Secondary Market Transactions in Government Securities - Short Selling
Accordingly it has been decided as under: 1) A custodian may undertake a short sale transaction with its GAH within the permissible short sale limits; 2) A custodian may put through a cover transaction with a GAH to square a short sale transaction in the related security undertaken with a market participant other than its GAH/s.

RBI - Tolerance and Respect for Economic Progress
Convocation address by Dr. Raghuram Rajan, Governor, Reserve Bank of India.

RBI - Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy - Review of the Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan (CAP)
The Department of Banking Regulation, Reserve Bank has made certain modifications to the Framework vide circulars. It has been decided that the modifications made in the Framework vide the above mentioned circulars shall also be, mutatis mutandis, applicable to NBFCs.

RBI - Y V Reddy: Financial inclusion and central banking - reflections and issues
Keynote speech by Dr Y V Reddy, Governor of the Reserve Bank of India.


ASIC 2014 - 15 Annual report tabled
ASIC's annual report for the 2014 - 2015 financial year was tabled on Friday 30 October 2015 in the Australian Parliament.

ASIC publishes changes to market integrity rules
ASIC published amendments to ASIC market integrity rules to ensure warrants and exchange traded funds (ETFs) admitted to quotation on Chi-X Australia Pty Ltd (Chi-X)'s new investment product market are subject to an appropriate regulatory regime. This follows the recent variation to Chi-X's Australian market licence and amendments to Chi-X's operating rules.


FSC Improves Prudential Standards Across Financial Services Sectors
The FSC plans to implement prudential regulations in accordance with global standards, while streamlining prudential standards for each sector to prevent regulatory arbitrage across financial services sectors.

KRX - The Result of 2015 ISG Seoul Meeting
The Market Oversight Commission (MOC) of the KRX has achieved the expected results by enhancing its global image as a self-regulatory organization since it has led the discussions on the global regulatory issues with the smooth process of the meeting. This meeting has covered mainly the change in the trend of trading in the markets including frequent placements and cancellations of orders according to the widespread algorithmic trading. In particular, specific unfair trading cases such as spoofing and layering by using the algorithmic trading and high frequency trading were noted. There was an extensive exchange of views among the participants on system development to prevent the manipulative stock trading and the market monitoring techniques of each country.

KRX obtained an acknowledgement as a clearing organization from CFTC
Korea Exchange (KRX) obtained an acknowledgement as an Derivatives Clearing Organization (DCO) from the U.S. Commodity Futures Trading Commission (CFTC) on October 26, 2015. In order to clear the trades of U.S. persons, a clearing entity should be acknowledged by the CFTC by either registering as a DCO or obtaining an exemption from registration.

KRX revises Fee schedule
The Korea Exchange releases a new fee schedule, which is effective from November 23, 2015.


BNM - "Crisis Preparedness Institutional Arrangements and Coordination, Crisis Communication and Contingency Planning"
Datuk Nor Shamsiah Mohd Yunus - "Crisis preparedness menu for guardians of financial stability"

BNM - Deputy Governor's Keynote Address at the Payment System Forum and Exhibition 2015
Speech by Dato' Muhammad bin Ibrahim, he provides an update on where BNM are in their migration path five years since they launched the Financial Sector Blueprint; thoughts on how collaborative efforts among various stakeholders in the payment value chain can leverage and thrive on e-payments as a strategic tool in today's increasingly dynamic and competitive environment, and opportunities that can be realised in relation to the Financial Sector Blueprint targets with specific emphasis on key priorities for 2016.


Government, House deliberate coverage issue in JPSK bill
Coverage of the Financial System Stability Net (JPSK) in the upcoming JPSK bill is expected to take center stage during its deliberation at the House of Representatives, as banking may not be the only financial sector within its remit. According to Finance Minister Bambang Brodjonegoro, several issues remain to be resolved to make way for the bill to be passed into law. "At present, the bill only covers issues related to the banking sector. However, discussion has arisen about whether it should cover other financial sectors as well. Insurance, for instance," he said recently. (Jakarta Post)

Indonesia Drops Visa Rules For Foreign Workers in Latest U-Turn
Indonesia has dropped rules imposed earlier this year that added visa paperwork and restrictions for foreign workers in the country, after complaints by companies. The measures scrapped include a need for visas for foreigners attending work meetings in Indonesia, permits for non-resident company directors, and a requirement to have 10 local workers for every non-Indonesian, Hery Sudarmanto, an official at the manpower ministry said. The government felt the original rules, imposed in July, didn't support investment, he said. "This was making investors think that Indonesia was a lot of hassle," Sudarmanto said. (Bloomberg)


FSB - New measures to promote resolvability, including effective cross-border resolution
The Financial Stability Board (FSB) released two finalised guidance papers and three consultative documents as part of its policy agenda to end "too-big-to-fail" and promote the resolvability of all financial institutions that could be systemic in failure through full implementation in substance and in scope of theKey Attributes of Effective Resolution Regimes for Financial Institutions.

The two finalised guidance papers are:

  • Principles for Cross-border Effectiveness of Resolution Actions - These Principles set out statutory and contractual mechanisms that jurisdictions should consider including in their legal frameworks to give cross-border effect to resolution actions in accordance with the Key Attributes.
  • Guidance on Cooperation and Information Sharing with Host Authorities of Jurisdictions where a Global Systemically Important Financial Institution (G-SIFI) has a Systemic Presence that are Not Represented on its Crisis Management Group (CMG) - This guidance promotes cooperation and information sharing between CMGs for G-SIFIs and authorities from jurisdictions not represented on the CMG where the firm is systemic for their market. CMGs only include a limited number of home and key host authorities and cooperation beyond the CMG membership is crucial for achieving effective resolution of a G-SIFI as a whole.

The FSB issued the following documents for consultation:

  • Consultative document on the Temporary Funding Needed to Support the Orderly Resolution of a Global Systemically Important Bank (G-SIB) - The proposed principles address the risk of banks having insufficient liquidity to maintain critical operations during a resolution. The document proposes Guiding Principles that are intended to ensure that temporary funding is available to enable the effective resolution of G-SIBs without bail-out by the public sector and in a way that reduces moral hazard, with a preference for private sector provision of liquidity. Public comments are welcome by 4 January 2016.
  • Consultative document on Arrangements to Support Operational Continuity in Resolution - The proposed guidance sets out arrangements to ensure continuity of critical shared services, such as IT infrastructure and software-related services, that are necessary to maintain the continued provision, or facilitate the orderly wind down, of a firm's critical functions in resolution. Addressing these issues will help to remove impediments to the orderly and effective resolution of firms. Public comments are welcome by 4 January 2016.
  • Consultative document on developing Effective Resolution Strategies and Plans for Systemically Important Insurers - The proposed guidance should assist authorities in developing effective resolution strategies and plans for systemic insurers and should also assist CMGs of Global Systemically Important Insurers (G-SIIs) in their resolution planning work. It has been developed in consultation with the International Association of Insurance Supervisors (IAIS) and builds on the implementation guidance published by the FSB in October 2014 on how provisions of the Key Attributes, including resolution powers and the details of recovery and resolution planning, should be interpreted for different types of financial institution, including insurers. The proposed guidance also incorporates guidance on the identification of critical insurance functions which reflects the responses received from the public consultation of October 2014. Public comments are welcome by 4 January 2016.

FSB publishes the 2015 update of the G-SIB list
The Financial Stability Board (FSB) published an updated list of global systemically important banks (G-SIBs). The updated list comprises a total of 30 banks with one new bank, China Construction Bank, being added and one bank, BBVA, being removed from the list, and with Royal Bank of Scotland being moved down into the 1% bucket for required higher loss absorbency. The next update to the list will be published in November 2016.

FSB publishes the 2015 update of the G-SII list
The Financial Stability Board (FSB) published an updated list of global systemically important insurers (G-SIIs). The updated list comprises a total of nine insurers with one new insurer, Aegon, being added and with Generali being removed. The next list will be published in November 2016.

FSB Chair Mark Carney to hold briefing session in advance of the G20 Summit to update on the FSB's work
The Financial Stability Board (FSB) will hold an on-the-record briefing session on 9 November in Basel in advance of the Antalya G20 Summit to provide an update on FSB work. Mark Carney, Chairman of the FSB will give details on the final term sheet for Total Loss-Absorbing Capacity (TLAC) for global systemically important banks, the FSB's first annual report on the Implementation and effects of the G20 financial regulatory reforms and the FSB's annual Resolution progress report.

FSB - Ninth Meeting of the Financial Stability Board Regional Consultative Group for Europe
Members of the FSB RCG Europe began by discussing vulnerabilities and financial stability issues during which members exchanged views on global and regional macroeconomic and financial market developments and their potential impact on the region. Members were then presented with the actions considered by the European Commission following the Five Presidents' Report and exchanged views on them. Risks, information sharing, recovery and resolution in cross-border central counterparties (CCPs) was another issue for discussion, which included deliberations on various policy measures that allow CCPs to safeguard their own viability without endangering the stability of clearing members. The meeting was preceded by an informal seminar that considered how monetary policy and financial stability interlinked and more specifically to what extent monetary policy frameworks should take into account financial stability objectives.


U.S. Federal Reserve - Agencies finalize swap margin rule
Five federal agencies have issued a final rule to establish capital and margin requirements for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants regulated by one of the agencies ("covered swap entities"), as required by the Dodd-Frank Act. The final rule, issued by the Farm Credit Administration (FCA), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC), establishes minimum margin requirements for swaps and security-based swaps that are not cleared through a clearinghouse. The margin requirements help ensure the safety and soundness of swap trading in light of the risk to the financial system associated with non-cleared swaps activity.

Federal Reserve Board proposes new rule to strengthen the ability of largest domestic and foreign banks operating in the United States to be resolved without extraordinary government support or taxpayer assistance
The Federal Reserve Board proposed a new rule that would strengthen the ability of the largest domestic and foreign banks operating in the United States to be resolved without extraordinary government support or taxpayer assistance. The proposed rule would apply to domestic firms identified by the Board as global systemically important banks (GSIBs) and to the U.S. operations of foreign GSIBs. These institutions would be required to meet a new long-term debt requirement and a new "total loss-absorbing capacity," or TLAC, requirement. The requirements will bolster financial stability by improving the ability of banks covered by the rule to withstand financial stress and failure without imposing losses on taxpayers.

CFTC's Division of Market Oversight Extends Time-Limited No-Action Relief for Swap Execution Facilities from Certain "Block Trade" Requirements
Commission regulation Section 43.2 defines a "block trade" as, among other things, a publicly reportable swap transaction that "[o]ccurs away from the registered [SEF]'s or [DCM]'s trading system or platform and is executed pursuant to the registered [SEF]'s or [DCM]'s rules and procedures." The No-Action Letter extends time-limited relief to SEFs from the "occurs away" requirement under Section 43.2 until November 15, 2016. The extended relief will provide the Division staff time to continue to review and evaluate SEF trading practices and functionalities for pre-execution credit checks. The extension will also allow the Division to consider, develop and evaluate best practices and more permanent solutions to the issues involved in screening block trade orders for compliance with risk-based limits including, if appropriate, amendments to Commission regulations.


EBA consults on Guidelines on how confidential information collected under the BRRD should be disclosed
The European Banking Authority (EBA) launched a consultation on draft Guidelines on how confidential information collected under the Bank Recovery and Resolution Directive (BRRD) should be disclosed in summary or collective form without identifying individual institutions or relevant entities. The aim of the Guidelines is to promote symmetric information and convergence of supervisory and resolution practices regarding the disclosure of confidential information. The consultation runs until 27 January 2016.

ESMA publishes responses to the Consultation on Guidelines on sound remuneration policies under the UCITS Directive and AIFMD
The European Securities and Markets Authority (ESMA) has published the responses received to the Consultation on Guidelines on sound remuneration policies under the UCITS Directive and AIFMD.

ESMA Chair Maijoor speaking on potentials of and challenges for EU crowdfunding
The Chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, has delivered a keynote speech to the 4th Crowdfunding Convention organised by the European Crowdfunding Network's (ECN) in Paris, France. In his speech Maijoor stressed the potentials, evolution and challenges of European crowdfunding from a regulatory view-point. ESMA's aim is to enable crowdfunding to reach its potential as a source of finance, while ensuring that risks to users of crowdfunding platforms are identified and addressed in a proportionate and convergent way across the EU.

The Bank of England's approach to stress testing the UK banking system
Speech by Alex Brazier.


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